For almost 130 years, the American Association of Architects (AIA) has published form construction documents. The AIA family of documents is among the most popular and commonly used form construction documents in the construction industry. The last time that AIA issued major changes to the contract family of documents was 2007. Historically, AIA has issued revisions to their standard form contracts every 10 years. Consistent with its custom, AIA recently released revisions to 11 different forms and plans to release revisions to additional forms in the fall of 2017.
This article focuses on the changes to the AIA-A201. The AIA-A201 is the general conditions form that is used in conjunction with certain other contract forms, such as the AIA-A101 “Standard Form of Agreement Between an Owner and Contractor Where the Basis of Payment is a Stipulated Sum.” Most of the changes are relatively minor clarifications or improvements. For instance, the revised AIA-A201 now defines the term “Separate Contractor(s).” AIA also added provisions that some may consider boilerplate, such as the addition of a “survival” clause. But, AIA also made substantive changes, some of which are discussed below:
- The most significant change to the AIA-A201 is the creation of an insurance and bonds exhibit. In the 2007 version, the insurance and bond requirements were primarily set forth in the agreement itself. Now, the majority of the insurance and bond terms are included in an exhibit, which must be read in conjunction with the remaining insurance terms in Section 11 of the agreement. The new AIA insurance exhibit allows for much greater flexibility in choosing insurance coverage and permits the parties to tailor their insurance coverage to the specific needs of their project. For instance, the exhibit distinguishes between insurance coverages that are required (such as workers’ compensation or automobile liability insurance) versus optional (such as asbestos liability or loss of use insurance). The AIA-A201 also makes some modifications to general insurance terms, such as establishing specific owner liability to contractor for the owner’s failure to procure insurance and requiring waivers of subrogation under insurance policies separate from those policies insuring the project.
- In a response to the financial crisis that followed the issuance of the 2007 edition, AIA developed more comprehensive language regarding the owner’s duty to provide the contractor with information concerning its ability to pay. For instance, the revised AIA-A201 creates a detailed procedure outlining when a contractor can refuse to proceed with the work, or even suspend work in certain instances, if the owner does not provide timely information concerning its financial arrangements. The form does, however, require the contractor to keep the owner’s financial information confidential.
- Recognizing recent changes in communication, AIA now allows for notices to be sent through “electronic transmission” where provided. It is important to note, however, that notice of “Claims” must still be sent by personal delivery, certified/registered mail, or courier. This suggests that a notice of a “Claim” deserves greater attention than other more routine notices throughout the contract performance period.
- AIA now requires all warranties be issued in the name of the owner or transferrable to the owner. Considering that contractors generally install equipment or use materials manufactured or provided by other parties, this requirement simplifies the warranty process. The revised AIA-A201 also clarifies that some of the contractor’s warranty obligations occurring before substantial completion are different from its obligations occurring after substantial completion.
- In instances where an owner has terminated a contractor for convenience, AIA has substituted the owner’s obligation to reimburse contractor “for reasonable overhead and profit on the work not executed” with terms requiring the owner to pay “costs attributable to termination of subcontracts” and a “termination fee.”
- There is a new timing mechanism that appears to bar a party’s ability to file a claim in arbitration or litigation. Specifically, after the initial decision and mediation, either party may demand that the other party file its claim in either arbitration or litigation. If the other party does not file a claim within 60 days of the demand, then both parties waive their rights to arbitration or litigation with respect to the initial decision. The revised AIA form also provides additional clarification about the role of the initial decision maker.
- The 2017 revisions specify, in greater detail, the information to be included in schedule submittals, including specification of the schedule milestone dates and an apportionment of the work by construction activity.
- Contractors are now explicitly required to submit releases and waivers of liens along with their applications for progress payment. In addition, a new provision has been inserted to require contractors to indemnify the owner from all damages it suffers as a result of a lien or claim filed by a subcontractor where the owner has fully complied with its payment obligations.
- The change order provision has been revised to outline the contractor’s rights when it disagrees upon whether a proposed change is a “minor change” (or a change that does not affect the contract sum or contract time). Specifically, if the contractor is asked to perform a “minor change” but the contractor believes that such change will affect the contract sum or contract time, the contractor can now refuse to perform the proposed change until the matter is resolved or a change directive is issued.
- The document requires greater use of Building Information Modeling (BIM) and digital data. In fact, by default, the parties are required to use an AIA BIM and digital data exhibit to establish the protocols for the development, use, transmission, and exchange of digital data.
- The revised AIA-A201 form also allows for more direct communication between owner and contractor, as opposed to communicating through the architect.
The list above is not a comprehensive list of the changes to the AIA-A201; rather, it is intended to set forth some “highlights.” Anyone attempting to use the new 2017 form should carefully compare the entire 2017 form with the 2007 form. The AIA publishes a helpful comparison of the two documents on its website.
In future blog posts, we will analyze some of the changes to the other form agreements between owner and contractor that were recently revised by the AIA, including AIA-A101 (where basis of payment is a stipulated sum), AIA-A102 (where basis of payment is cost of the work plus a fee with a GMP), and AIA-A103 (where basis of payment is cost of the work plus a fee without a GMP). Please check back to this blog for those updates.
In the meantime, if you have any other questions about the recent AIA revisions or drafting a contract for your particular project, please do not hesitate to contact us.